Wall Street's second-quarter earnings season kicks into high gear this week, with investors bracing for its best reporting season in more than a decade amid the diminishing impact of the COVID-19 health crisis on various industries and companies.
With trading near all-time highs, most attention will once again be on the five major mega-cap tech companies, all of which will report their respective results next week.
All five are expected to receive another quarter of blockbuster revenue and are worth considering given their growing dominance in the tech space.
1. Google
Arrival date: Tuesday 27 July
EPS growth estimate: +88.6% yoy
Estimated Revenue Growth: +46.1% YoY
Performance to date: +44%
Market Cap: $1.69 Trillion
Its parent Google Alphabet (NASDAQ:) was the best-performing FAAMG stock of 2021 so far — by a wide margin — as the internet search giant continues to capitalize on broad strength in the online advertising market.
GOOGL shares, which are up 44% over the past year, ended Tuesday at $2,524.20, ahead of the recent all-time high of $2,585.50 reached on July 14.
The Mountain View, California-based tech giant has a market cap of $1.69 trillion, making it the fourth most valuable company trading on the U.S. stock exchange.
Google — which shattered sales records for the stock market and announced a new $50 billion share repurchase plan — reports the following financial results after the US market closed on Tuesday, July 27.
Consensus calls for second-quarter earnings per share (EPS) of $19.11, an improvement of a whopping 88.6% from earnings per share of $10.13 in the same period a year ago . Revenue is expected to reach $55.9 billion, an increase of approximately 46% from revenue of $38.3 billion in the same quarter a year earlier, driven by a continued increase in digital advertising spend.
Investors will continue to focus on the growth rates of Google's core business of web search and ad revenue, which posted a year-over-year gain of nearly 32% to $44 in the previous quarter .6 billion. YouTube ad revenue growth, which grew 49% to $6.01 billion in the last quarter, will also be watched.
In addition, a segment that needs to be primed for another quarter of blockbuster growth is Alphabet's Google Cloud Platform, whose first-quarter revenue grew 46% to $4.05 billion. The company has invested heavily in its cloud business – which is not yet profitable – as it overtakes Amazon and Microsoft.
Investors will also be eager to hear new details about the US Justice Department's pending antitrust case against Google. Part of the lawsuit concerns allegations that the tech giant is monopolizing its internet search function to stifle competition.
2. Microsoft
Arrival date: Tuesday 27 July
EPS growth estimate: +30.8% yoy
Estimated revenue growth: +15.8% yoy
Performance to date: +25.6%
Market Cap: $2.10 Trillion
Microsoft (NASDAQ:) is flying high, with shares of the tech titan climbing to new all-time highs recently, thanks to strong demand for its cloud-based offering.
The Redmond, Washington-based company has seen its equity gains rise about 26% since the beginning of the year, outpacing the 15% increase in the same period.
MSFT shares, which hit a record high of $284.10 on July 16, closed at $279.32 last night. With a market cap of $2.10 trillion, Microsoft is the second most valuable company listed on the US stock exchange.
Microsoft, which shattered expectations for revenue and earnings in the United States, is expected to report its next financial results on Tuesday, July 27 after the closing bell.
Consensus estimates call for the software giant to post earnings per share of $1.91 for its fiscal fourth quarter, an improvement of nearly 31% from earnings per share of $1.46 in the same period a year ago.
Revenues are expected to hit an all-time high of $44 billion, up about 16% from revenue of $38 billion in the same period a year earlier, benefiting from rising demand for its cloud computing services.
As such, investors will focus on growth in Microsoft's thriving Intelligent Cloud businesses, including Azure, SQL Server, Windows Server, GitHub, and other enterprise services. Microsoft's commercial cloud revenue grew 23% year-over-year to $15.1 billion in the most recent quarter, while Azure services revenue grew 50%.
Another key metric to focus on is how well Microsoft's Productivity and Business Process segment performed. The main unit includes Office 365 cloud productivity software, Teams communication app, LinkedIn, as well as Dynamics products and cloud services.
3. Apple
Arrival date: Tuesday 27 July
EPS growth estimate: +56.2% yoy
Estimated sales growth: +22.3% year-on-year
Performance to date: +10.1%
Market Capitalization: $2.44 trillion
Apple (NASDAQ:) was on track for its earnings report, with shares of the technology and consumer electronics conglomerate hitting a string of record highs in recent sessions.
AAPL shares hit $146.15 last night, not far from a record high of $149.98 on July 15. At its current level, the Cupertino, California-based iPhone giant has a market cap of $2.44 trillion, making it the most valuable company trading on the U.S. stock exchange.
Despite recent gains, Apple has seen its shares lag behind the other four Big Tech stocks mentioned, rising "only" 10.1% since early 2021.
Consensus calls for earnings per share of $1.00 for fiscal third quarter as Apple reports its latest financial results after the market closes on Tuesday, July 27, up nearly 56% from the same period a year ago.
Revenues are expected to exceed 22% year-over-year to $73.0 billion, reflecting strong demand for the 5G-enabled iPhone 12 lineup.
In addition to the top and bottom line numbers, Wall Street will be paying close attention to growth in Apple's iPad and Mac businesses as both have performed well in today's work-from-home environment, with year-over-year revenues growth rates of 79% and 70% respectively in the last quarter.
Any updates on the growth of its services business, including the App Store, AppleCare, iCloud, Apple Pay, Apple Music, Apple TV+ and Apple Fitness+, as well as the wearables segment, including AirPods wireless earbuds and Apple Watch – will also be in be focus.
In addition, investors will be happy to hear if Apple will provide more details on the potential impact of the regulatory and legal challenges it currently faces in the US and Europe.
4. Facebook
Arrival date: Wednesday 28 July
EPS growth estimate: +68.3% yoy
Estimated Revenue Growth: +48.9% YoY
Performance to date: +25.1%
Market Capitalization: $968.7 Billion
Despite several challenges, such as ongoing regulatory investigations at home and abroad, ongoing privacy concerns, and recent changes to Apple's iOS 14 that could negatively impact Apple's advertising business, Facebook (NASDAQ:) stock rose. the foreground foot lately.
FB stock, which is up 25.1% so far, closed last night at $341.66, not far from a record high of $358.67 reached on July 6. At current levels, the Menlo Park, California-based company is valued at $968.7 billion, making it the fifth most valuable company traded in the U.S. stock market.
The social media giant, which has benefited from an acceleration in ad spend, now has about 3.45 billion monthly users in its family of apps, including Instagram, Messenger and WhatsApp.
Facebook, whose earnings and earnings beat expectations in the United States, is expected to report its second quarter results on Wednesday, July 28 after the US market closes.
The call is for earnings per share of $3.03 for the period, up nearly 69% from earnings per share of $1.80 in the same quarter a year earlier. Meanwhile, year-over-year revenue is expected to grow 49% to $27.8 billion, again driven by strong advertiser demand and higher ad prices.
As usual, the market will pay attention to Facebook's update regarding its active user accounts and average revenue per user (ARPU – two key metrics for the social networking company.
Facebook said daily active users (DAUs) were up 8% from the first quarter from a year earlier to 1.88 billion, while monthly active users (MAUs) increased by 10% to 2.85 billion. Meanwhile, the ARPU clocked in at a double-digit gain, up 19% from the same period last year to $9.27.
In addition to the top and bottom-line numbers, comments from management regarding the negative impact of Apple's recent iOS update — which would affect Facebook's ability to track users' activity on third-party sites – limited, also receive attention.
5. Amazon
Arrival date: Thursday 29 July
Estimated EPS growth: +18.5% YoY
Estimated sales growth: +29.7% year-on-year
Performance to date: +9.7%
Market Cap: $1.80 Trillion
Amazon (NASDAQ:) was the other relative underperformer among the major technology leaders, with gains of less than 10% since the start of the year. Like Apple, Amazon stocks have underperformed both the S&P 500 and NASDAQ so far in 2021.
Widely regarded as one of the biggest winners of the COVID-19 health crisis, Amazon stocks struggled this year as pandemic-era lockdown restrictions ended and consumers returned to brick-and-mortar stores in greater numbers.
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AMZN shares, which hit a new all-time high of $3,773.00 on July 13, ended at $3,573.19 yesterday. With a valuation of $1.80 trillion, the Seattle, Washington-based e-commerce and cloud giant is the third most valuable company listed on the U.S. stock exchange.
Amazon, which reported US burst earnings and earnings, is expected to report second-quarter financial results on Thursday, July 29 after the closing bell.
Analyst consensus favors earnings per share of $12.21, which would indicate year-over-year growth of nearly 19% from second quarter earnings of $10.30. 2020, meanwhile, revenue is expected to grow approximately 30% from the year-ago period to $115.3 billion, reflecting continued strength in both e-commerce and cloud computing.
Investors will focus on the company's booming cloud business to see if it can sustain its rapid growth. Amazon Web Services (AWS) revenue rose 32% in the first quarter to a record $13.5 billion, confirming its position as a leader in the cloud computing space, ahead of the aforementioned Microsoft Azure and Google Cloud.
Apart from the main retail and cloud segments, ad revenue, which has increasingly become a growth engine for Amazon, will also take center stage. While Amazon doesn't disclose the sales numbers of ads, they are included in the "Other" category of the company, where revenue grew 77% to $6.9 billion in the last quarter.
The growth of the Subscription Services division, which mainly consists of Amazon Prime, will also be central. The company now has 200 million Prime subscribers, 50 million more than at the beginning of 2020.
